National Post article: Couple wants to retire abroad in their 40s. Do their RRSPs, TFSAs and other investments add up to enough?

The National Post asked me to review the retirement and financial situation of Jason, 41, and Julia, 38, from Ottawa. It is an interesting story since they can retire so young at only ages 42 and 39. They have been strong savers, invest effectively, and plan to invest their entire house proceeds when they sell.

They’ve built a strong financial foundation with a $1.27M paid-off home and about $1.52M in investments and are wondering if they can retire early and move abroad with their two young kids.

Jason owns a corporation that retains about $180K a year after tax, and Julia earns $65K after tax (about $95K before tax). Their current annual expenses are $65K, which they expect to maintain when they retire to a lower-cost country such as Malaysia, Vietnam, or Thailand. 

They’ve also budgeted for major expenses like their children’s education and some flexibility for the unexpected.

Some of the key questions we explore in the article:

• Can Jason and Julia afford to retire in the next year or two?
• Is their retirement budget realistic for life overseas?
• What tax implications should they expect when moving abroad?
• How much of a safety margin do they need, given they could be retired for 50 years or more?
• What risks should they plan for, such as inflation, lifestyle creep, or currency changes?

CLICK THE LINK BELOW TO READ THE ARTICLE BY MARY TERESA BITTI:

National Post article: Couple wants to retire abroad in their 40s. Do their RRSPs, TFSAs and other investments add up to enough?

We are a family of four – me 41 male, wife 38 female, 11 year old son and 4 year old daughter and are wondering what is the earliest year my wife and I can retire? We would like to assume we live until age 95. 

Household Assets & expenses:

• Our annual household expenses at the moment are 65,000 CAD and we have a 1.27million CAD home in Ottawa that is mortgage free (the home value accounts for all selling costs, real estate agent fees if we were to sell in today’s market). We intend selling our home and investing the proceeds of our paid-off house at retirement.

• We also have 1.53million CAD of investments and cash in various accounts today including RRSP, TFSA, RESP, Savings bank and investment accounts invested primarily in low cost index funds.
• No debt.

Anticipated large expenses:

• We want to budget about 200,000 USD of undergraduate education cost per child for each of our kids over their four year undergraduate program.
• We plan to retire in a lower cost country such as Malaysia, Vietnam or Thailand. I expect living, taxes, travel and health care costs when we retire abroad to be about the same as is today that is 65,000 CAD per year but indexed to inflation.
• Also need to account for around USD 20,000 per year index to inflation for our second child who will be attending international school for middle and high school (from grades 6 to 12) when we move abroad to retire (assuming we do retire in the next 6-7 years).
• Also want to account for USD 30,000 of unexpected expenses every 5 years (inflation-adjusted) starting this year.

I presently save about 180,000 CAD within a corporation that I own (the 180,000 is retained earnings after accounting for all business taxes and fees paid) and my wife is employed making 95000 CAD annually pre-tax. Post tax her take home is around 65000 CAD that covers our annual household expenses including RESP contributions (RRSP and TFSA so far have been contributed to by surplus cash we’ve had or me making a small withdrawal from my corp). Savings are invested within a corporation brokerage account mostly invested in diversified low cost index funds and some cash is left as buffer. 

Ontario-based Jason, 41, and his wife Julia, 38, have worked hard, built up significant wealth and are ready to retire – ideally within the next year or two but definitely within seven years (2032 when Julia hits age 45). The plan is to make their money last as long as possible by moving to a lower-cost country such as Malaysia, Vietnam or Thailand. 

Jason and Julia have two young children who are 11 and 4 years old. The couple are budgeting for and want to save US$200,000 for each of their children to complete four-year undergraduate degrees. The couple has done their research and expect they will also have to pay US$20,000 a year indexed to inflation for their youngest child to attend international middle-school and high school (grades 6 to 12) assuming they retire and move abroad as planned.  

Their current annual expenses are C$65,000 and they expect that figure, indexed to inflation, will remain the same in retirement to one of the countries they’ve identified. However, they would also like to build in an additional US$30,000 for unexpected expenses every five years starting next year, 2026. 

The couple are debt free and own a home valued at C$1.27 million after selling costs. When they sell, they plan to invest the proceeds. They currently have C$1.52 million across an investment portfolio that includes savings accounts (C$19,000) Registered Savings Plans (C$472,656), Tax Free Savings Plans (C$302,480), Registered Education Savings Plans (C$115,700), and investment accounts in Jason’s Canadian Controlled Private Corporation (C$611,000). They are fully invested in equities primarily in low-cost index funds such as VXC and some PSU.U. Jason estimates that average blended returns to be between 7 per cent and 8 per cent.

Jason’s corporation earns C$220,000 in annual revenue. After taxes, the corporation retains about C$180,000. These retained earnings are invested largely in globally diversified exchange traded funds in investment accounts held by the corporation.

Julia earns C$65,000 after tax. Her income covers the family’s annual household expenses including RESP contributions. They maximize their RRSP and TFSA contributions with surplus cash or withdrawals from Jason’s corporation. Julia and Jason each have $500,000 20-year term life insurance policies in place for “extreme contingencies” and estate planning. They each have their wills and personal care directives in place.

Are Jason and Julia in a position to retire soon, and if so, how soon? Is their budgeting for expected lifestyle and unexpected expenses in retirement reasonable? Realistic? What personal and corporate tax implications do they need to consider if they retire in Malaysia, Vietnam or Thailand? What other unknowns should they be aware of? 

They would like you to not factor CPP/OAS into your calculations as they view these benefits as cherry on the cake and don’t want to count on them.

Financial Plan

Are Jason and Julia in a position to retire soon, and if so, how soon?

To retire on their lower cost international lifestyle, they will need $86,000/year before tax to provide them with $65,000/year after tax plus an extra $30,000 US/year every 5 years for unexpected expenses.

With their current retirement portfolio of $1.4 million, saving over $200,000/year, and invested 100% in equities, plus investing all of their house proceeds when they retire, they are on track to retire next year. They are actually 26% ahead of their goal of retiring next year. It is good to have a margin of safety of 10-20%, so they are in a good position.

This excludes CPP & OAS which they consider a bonus, and allows enough to pay for a foreign private school for their youngest child for 12 years and a 4-year degree in the US for both kids.

They want to retire in 1-2 years ideally, which they should be able to afford.

If they retire in 2 years instead of next year, then they are 39% ahead instead of 26% ahead. That gives them a bit more margin of safety. This is not technically necessary, but given how many decades they will be retired, it might be a good idea.

Next year, they will only be ages 42 and 39. They are part of the growing FIRE movement to be financially independent and retire early. This is possible because they have been strong savers, invest effectively, and plan to invest their entire house proceeds when they sell.

Is their budgeting for expected lifestyle and unexpected expenses in retirement reasonable? Realistic?

Yes, their retirement goal of $86,000/year combined income before tax is more than reasonable for a comfortable retirement in these countries. This income level positions them in the upper-middle to affluent expat bracket, allowing for a high quality of life, including modern housing, dining out, travel, and healthcare—far exceeding local living costs.

The cost of living is generally a bit higher in Vietnam than in Malaysia or Thailand.

What personal and corporate tax implications do they need to consider if they retire in Malaysia, Vietnam or Thailand?

They plan to retire in Malaysia, Vietnam or Thailand. Malaysia and Vietnam have tax treaties with Canada, but Thailand does not. Therefore, they would pay quite a bit higher tax in Thailand. If they leave their investments in Canada where there are good investment options, they would mainly pay the low 15% withholding tax if they retire in Malaysia or Vietnam, but the withholding tax would be 25% if they retire in Thailand.

What other unknowns should they be aware of?

There are many unknowns, especially since they are retiring so young when there are many decades in front of them. The biggest risk may be that their lifestyle creeps up or they decide to move to a more expensive country. They might decide to pay for more costs for their kids. Any country could have high inflation, which is more common in less developed countries. There is also currency risk in foreign countries and the risk of tax rules changing significantly.

Ed